Abu Dhabi Office Market Review. Summer|2021

Abu Dhabi Office Market Review Summer|2021

ww

w.k

nig

htf

ran

k.a

e

A biannual review of key trends and the performance of Abu Dhabi’s office market

Abu Dhabi Office Market Review. Summer|2021

Rents for best-in-class space edge upwards

Headline rents for Grade A offices Abu Dhabi have shown resilience during the second quarter, mirroring the

emerging trend in Dubai, with rents in three of the five submarkets we track – Abu Dhabi Freezones (AED 1,970

psm), Capital Centre (AED 1,325 psm) and Corniche/Downtown (AED 1,600 psm) – experiencing rental growth.

Indeed, after rising by 6.7% over the last 12 months, rents in the Corniche/Downtown area have now reached

their highest level since at least 2017.

THE MARKET IN NUMBERS

average Grade A office rents in new space requirements in Q2 average occupancy levels in the Corniche/Downtown city’s best buildings (Grade A and B)

Source: Knight Frank

As has been the case throughout the pandemic, the sharpened focus of occupiers on best-in-class space is also

helping to hold overall occupancy levels steady at c. 79% in the city’s best buildings; up from 78% in Q1 2021.

The somewhat anomalous performance of climbing rents and steady vacancy rates is also in part being driven by

landlords’ needs to boost their rental income in order to meet their financing obligations and so some are perhaps

adjusting rents upwards without new demand to support any increases. That said, overall requirements for new

office space reached 11,260 sqm during Q2, up from 9,750 sqm during the same period last year.

0%

5%

10%

15%

20%

25%

Share of new office space requirements by sector | Q2 2021

Source: Knight Frank

11,260 sqm

79% AED 1,600 psm

Abu Dhabi Office Market Review. Summer|2021

“As has been the case throughout the pandemic, the sharpened focus of occupiers on best-in-class space is also helping to hold overall

occupancy levels steady.”

Banking & finance most active sector

At just over 20% of all new space requirements, the banking and finance sector dominated demand during the

second quarter, with the largest requirement linked to a public sector entity. This was closely followed by the

healthcare and education sector (19.1%), while the industrial and logistics sector (17.8%) came in third place.

The largest new requirement during Q2 however came from the industrial and logistics sector, with 2,000 sqm

being sought in the Capital Centre area.

Demand from the latter two sectors stems in part from peripheral businesses linked to the decision by the government of Abu Dhabi to begin manufacturing Covid-19 vaccines at the Khalifa Industrial Zone Abu Dhabi (KIZAD). Other healthcare and education linked demand is being driven by businesses looking for a first base in Abu Dhabi.

The other noteworthy source of inquiries stems from Israeli businesses, linked to the technology sector, who are

looking for a first presence in the UAE following the normalisation of relations between the two states in

September 2020.

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

Q3 2

017

Q4 2

017

Q1 2

018

Q2 2

018

Q3 2

018

Q4 2

018

Q1 2

019

Q2 2

019

Q3 2

019

Q4 2

019

Q1 2

020

Q2 2

020

Q3 2

020

Q4 2

020

Q1 2

021

Q2 2

021

Performance of headline office rents across Abu Dhabi

Abu Dhabi Mainland Abu Dhabi Freezones Al Reem Island

Capital Centre Corniche / Downtown

Source: Knight Frank

AED psm

Abu Dhabi Office Market Review. Summer|2021

ISSUE IN FOCUS: ESG

The war for talent was a well-entrenched issue

before Covid-19 and one that will transcend the

pandemic. In fact, as global economies rev up,

we’re seeing staff shortages being reported around

the world. The UK for instance is now reporting its

worst labour shortage since 1997 and it’s a similar

story in the United States.

One of the ways in which businesses have been

mitigating against issues stemming from the war for

talent is by occupying best-in-class office space –

this is where environmental, social and governance

(ESG) considerations come into their own. And this

is precisely why we continue to see a flight to

quality and greater rental resilience for the best

offices in the best locations.

As going ‘green’, or being seen as ‘green’, becomes

the expected norm, buildings perceived to do more

harm than good to the environment will likely see

diminished occupier demand. And while much is

being debated around the magnitude of green rental

premia, ‘brown’ discounts are equally likely to

become more commonplace as businesses shy

away from buildings that don’t match their ESG

aspirations.

For Abu Dhabi’s landlords the message is clear: to

win and retain new occupier tenants, the green

agenda must take centre stage and while there is a

disparity in the recognition of this issue, there is

clear opportunity to stand out in the market as a

green leader.

HEADLINE GRADE A OFFICE RENTS ACROSS ABU DHABI (AED psm)

Submarket Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 3 month

change

12 month

change

Abu Dhabi Mainland

1,163 1,163 1,188 1,188 1,188 0.0% 2.2%

Abu Dhabi Freezones

2,013 1,980 1,990 1,950 1,970 1.0% -2.1%

Al Reem Island

960 960 900 950 950 0.0% -1.0%

Capital Centre

1,333 1,333 1,308 1,308 1,325 1.3% -0.6%

Corniche / Downtown

1,500 1,513 1,538 1,563 1,600 2.4% 6.7%

Abu Dhabi Office Market Review. Summer|2021

Source: Knight Frank

David Crook

Partner - Head of Abu Dhabi

+971 56 2197 389

david.crook@me.knightfrank.com

Important Notice - © Knight Frank LLP 2021

Note: This report is published for general information only and not to be relied upon in any way. Although high standards have been used in the

preparation of the information, analysis, views and projections presented in this report, no responsibility or liability whatsoever can be accepted by

Knight Frank LLP for any loss or damage resultant from any use of, reliance on or reference to the contents of this document. As a general report,

this material does not necessarily represent the view of Knight Frank LLP in relation to particular properties or projects. Reproduction of this report

in whole or in part is not allowed without prior written approval of Knight Frank LLP to the form and content within which it appears. Knight Frank

Middle East Limited (Dubai Branch): Prime Star International Real Estate Brokers (PSIREB RERA ORN: 11964 trading as Knight Frank with

registration number 653414. Our registered office is: Level 5, Building 2, Emaar Business Park, PO Box 487207, Dubai, UAE.

Faisal Durrani

Partner - Head of Middle East Research

+44 7885 997 888

faisal.durrani@me.knightfrank.com

Contacts.

Priscilla Goh

Commercial Agent

Occupier Services & Commercial Agency, Abu Dhabi

+971 56 4202 313

priscilla.goh@me.knightfrank.com

Recent market leading publications

(Y)OUR SPACE ACTIVE CAPITAL THE LONDON REPORT THE WEALTH REPORT